Failing Health Care Co-ops Will Cost Taxpayers

Consumer Operated and Oriented Plan Programs (COOPs) were really a political compromise between Members of Congress who wanted a public plan option and those who didn’t. Once the Affordable Care Act passed, COOPs had outlived their usefulness. However, they are now failing and will cost taxpayers plenty. Senior Fellow Devon Herrick testified before a congressional committee.

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Why Taxes Are So High

"Even without legislated tax increases, taxes must be cut periodically to keep the burden from rising."

The vast increase in federal taxes is the result of two factors: 1) the 1990 and 1993 tax increases and 2) the effect of progressive tax rates. The latter may be more important. While tax rates are indexed to inflation, they are not adjusted for real growth in the economy. This means that even without legislated tax increases, taxes must be cut periodically just to keep the tax burden from rising. The wage base for Social Security taxes increases annually and, as workers manage to achieve some growth in their real incomes, they get pushed into higher tax brackets. As a recent Congressional Budget Office (CBO) report put it, "The GDP share [of taxes] creeps up over time as rising real incomes cause a larger fraction of income to be taxed in higher tax brackets."2 For example, a single worker with a taxable income of just $24,000, facing a 15 percent federal income tax, will pay 28 percent on his or her next dollar of income. With Social Security taxes on top of that on all earnings up to $62,700, workers with incomes between $20,000 and $60,000 are among the most heavily taxed people in America.